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Millhorn Elder Law Planning Group
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Closing the Insolvent Estate in Florida


When people think of a person’s estate, they usually reference the home, personal property, furniture, vehicles, jewelry and other assets. The estate might also possess stocks and bonds, intellectual property, and other funds. But what happens when a decedent passes away owing more than they possess? What if a decedent has nothing to pass on to loved ones but debt?  When this happens, it means the estate is insolvent, and it is actually very common. Contrary to popular opinion, a decedent’s debt is not waived or dissolved upon death, and estate cannot be closed in probate until creditors are informed of the decedent’s passing.

Understanding Insolvency

Insolvent is defined as owing debt without means to pay the debt back. An estate is classified as insolvent when the decedent owes more debt than the total value of their estate and combined assets. Sometimes there are insufficient assets to draw upon to open the estate account in probate, to handle funeral expenses or other needs. If the decedent did not have a life insurance policy, nest egg or trust, his or her loved ones might have to foot the bill.  This often leads to turmoil between next of kin about who is fiscally responsible or who will handle closing the estate, if the decedent did not name a personal representative in their will. In addition, the decedent might have written a will earlier in life before they accumulated death, but the provisions can no longer be fulfilled. This is because assets the decedent owned might have to be sold to satisfy creditors.

What About Creditors?

If a personal representative is not named, another family member or a hired estate law attorney can act in that capacity. The personal representative is responsible for winding up the estate’s affairs and overseeing the estate process, and notifying all creditors of the decedent’s passing. A direct notification to the estate’s creditors begins a thirty day deadline for the creditor to file a claim against the estate. If the personal representative is not sure what the decedent owed, or to whom, they should file a “Notice  to Creditors” in local newspapers or online notifying the public and potential creditors of the decedent’s death. Once published, a potential creditor has three months from the date of the notice to file a claim against the decedent’s estate. Without a published notification, the period to open a claim is extended to two years. It is in the estate and personal representative’s best interest to file a notice, allowing the estate to be closed expediently. Unsecured debt is waived if a creditor does not file a timely claim against the estate.

Dissolving Debt

Funds, assets, personal property and investment accounts remaining in the estate should be sold off or deducted to pay off debt. No distributions from the estate are made to beneficiaries until the account is solvent. If multiple creditors stake a claim, they paid based on whether the debt is secured or unsecured, and in the order they filed a claim. Any back taxes or debt owed to the State of Florida is satisfied first. Debt is secured if the creditor filed a security interest in the debt to perfect their interest. An example of secured debt is a mortgage. The lender has a security interest in the home. If the homeowner defaults on the mortgage, the creditor can foreclose on the home in less than 90 days. They also may require the debtor to pay the entire amount owed due at once.

Schedule a Consultation

Probate is not a straightforward process, especially if the estate is insolvent. Let our probate attorneys at Millhorn Elder Law Planning Group help you from start to finish. Call us today in The Villages to schedule a consultation.






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